Japan employers shift stance on minimum wage hikes

The Yomiuri Shimbun

21:00 JST, May 8, 2022

In a change of stance, small and midsize firms have indicated a willingness to accept the government’s decision on minimum wage increases due to a serious labor shortage and rising prices.

Many firms had been reluctant to accept the wage-hike policy due to the financial burden involved. Related parties are paying close attention whether the trend for receptivity to minimum wage hikes will lead to an increase in wage levels across the board in Japan.

Three organizations representing small and midsize firms — the Japan Chamber of Commerce and Industry (JCCI), the Central Federation of Societies of Commerce and Industry, and the National Federation of Small Business Associations — jointly submitted a minimum wage-related request late April to the government.

For fiscal 2021, the three entities requested that the government “maintain the current level” when it set the bottom line of wage, but the latest request did not include that phrase. In effect, they exhibited their tacit compliance with the wage hikes.

“Prices are rising, and some companies have already raised wages, JCCI Chairman Akio Mimura said. “The situation has changed.”

In a nationwide survey of small and midsize businesses conducted by the JCCI and another organization in February, 41.7% of businesses said minimum wages should be increased in fiscal 2022, up by 13.6 percentage points from the previous year. The figure was larger than the combined rate of businesses answering “the current level should be maintained” and “minimum wages should be decreased,” at 39.9%.

One major factor behind the shift is the labor shortage.

“A rise in pay is the only way [to secure workers],” said the president of an automobile parts manufacturer in Aichi Prefecture.

Because of the coronavirus pandemic, the company has been unable to hire enough foreign workers and is having difficulties securing young Japanese workers, the president said.

“Prices have started to rise, and boosting wages is necessary to protect employees’ lives,” said a senior official of an organization of small and midsize companies. “Many business owners likely have started to understand that a minimum wage hike is not a bad thing.”

Each summer, a revision guide to minimum wages is presented by the Central Minimum Wages Council, an advisory body to the labor minister, comprising representatives from both the workers’ side and the management side, as well as experts. As the Cabinet led by Prime Minister Fumio Kishida aims to achieve “a virtuous cycle of growth and distribution,” it likely hopes there will be mood for wage increases among businesses.

The request from the three organizations pointed out that small businesses have been dissatisfied with the high increases of about 3% in recent years. “Many small and midsize firms say business conditions had not been fully taken into consideration during the [wage hikes] discussions,” the request stated. It added that, when deciding government policy, there should be an opportunity for both labor and management representatives to express their opinions, and the situation regarding the economy and pay raises should be fully reflected.

The statements are seen as a warning against taking unilateral wage-hike decisions with underlying political motivations.

Hisashi Yamada, a researcher at the Japan Research Institute, Ltd., said: “Higher wages mean higher costs for companies, but if you look at society on the whole, there will be more demand and sales will increase. Businesses need to start thinking about raising wages as much as they can.”